Budget 2019 – Poor wording requires 2 ex-spouses within 5 years for Home Buyers Plan
This is one of those rare times I hope I am wrong in my interpretation, and look forward to being proven wrong by my professional colleagues.
On March 19, 2019 the federal government tabled its election-year budget. One of the newest and strangest provisions is the ability for people going through a separation or divorce to potentially have access to their RRSP under the Home Buyers Plan.
Now in my article and podcast entitled: “Escape Room – The NEW Small Business Tax Game – Family Edition” with respect to the Tax On Split Income (TOSI) rules, I made a tongue in cheek argument that people will be better off if they split, because then the TOSI rules won’t apply.
In keeping with the divorce theme, beginning in the year of hindsight, 2020, the federal government is giving you an incentive to split up and get your own place.
However, there are a few hoops:
On page 402 of the budget, under new paragraph 146.01(2.1)(a), at the time of your RRSP withdrawal under the Home Buyers Plan, you must make sure that:
- – the home you are buying is not the current home you are living in and you are disposing of the interest in the current home within two years; or
- – you are buying out your former spouse in your current home; and
you need to:
- be living separate and apart from your spouse or common-law partner;
- have been living separate and apart for a period of at least 90 days (markdown October 3, 2019 on the calendar),
- began living separate and apart from your spouse or common-law partner, this year, or any time in the previous 4 years (ok, you don’t have to wait for October); and…
…here is where the tabled proposed legislation gets messy.
Proposed subparagraph 146.01(2.1)(a)(ii) refers to where the individual
- wouldn’t be entitled to the home buyers plan because of living with a previous spouse in the past 4 years that isn’t the current spouse they are separating from
“(ii) in the absence of this subsection, the individual would not have a regular eligible amount because of the application of paragraph (f) of that definition in respect of a spouse or common-law partner other than the spouse referred to in clauses (i)(A) to (C), and…”
The problem with the wording of this provision, is that it is written in the affirmative by the legislators using the word “and”. This means, you must be able to answer “true” to all the tests for the entire paragraph to apply.
The way I read this, the only way to answer “true” to this subparagraph is if you have a second spouse (ie: spouse other than the spouse referred to) that you shared a home with and you split from in the past four years.
If you have a second spouse that you shared a home with in the past four years, then “paragraph (f)” in the definition of “regular eligible amount” would apply and the answer would be “true”.
If the answer is “true” you can then get access to your RRSP Home Buyers Plan.
If you don’t have a second spouse then, even though “paragraph (f)” might be met, the phrase “spouse other than the spouse referred to” would not be met, and therefore the answer would be “false”.
This would, in turn, cause the entire logic test of the provision to be “false” and so you would not be able to take out a “regular eligible amount” from your RRSP for the Home Buyers plan because you do not meet the provisions.
If my interpretation is correct then I would really be curious as to what part of the economy they are trying to stimulate.
In my opinion the legislation could be fixed with a simple edit:
“(ii) in the absence of this subsection, the individual would not have a regular eligible amount because of the application of paragraph (f) of that definition in respect of:
(A) a spouse or common-law partner; or
(B) a spouse or common-law partner other than the spouse referred to in clauses (i)(A) to (C); and…”
Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the President & Founder of CGL Strategic Business & Tax Advisors; you can find out more about Cory’s biography at http://www.CGLtax.ca/Litzenberger-Cory.html
Could be a long day tonight — Cam needs coffee
The Best Life Lesson for a Teen Is a Job
From the Brownstone Institute
During the Covid debacle, kids were locked out of school or otherwise condemned to an inferior Zoom education for up to two years. What were the alternatives? Unfortunately, since the New Deal, the federal government has severely restricted teenagers’ opportunities for gainful employment. But new evidence proves that keeping kids out of work doesn’t keep them out of mental health trouble.
Yet suggesting that kids take a job has become controversial in recent years. It is easy to find expert lists on the dangers of teenage employment. Evolve Treatment Center, a California therapy chain for teenagers, recently listed the possible “cons” of work:
- Jobs can add stress to a child’s life.
- Jobs can expose kids to people and situations they might not be ready for.
- A teen working a job might feel like childhood is ending too soon.
But stress is a natural part of life. Dealing with strange characters or ornery bosses can speedily teach kids far more than they learn from a droning public school teacher. And the sooner childhood ends, the sooner young adults can experience independence – one of the great propellants of personal growth.
When I came of age in the 1970s, nothing was more natural than seeking to earn a few bucks after school or during the summer. I was terminally bored in high school and jobs provided one of the few legal stimulants I found in those years.
Thanks to federal labor law, I was effectively banned from non-agricultural work before I turned 16. For two summers, I worked at a peach orchard five days a week, almost ten hours a day, pocketing $1.40 an hour and all the peach fuzz I took home on my neck and arms. Plus, there was no entertainment surcharge for the snakes I encountered in trees while a heavy metal bucket of peaches swung from my neck.
Actually, that gig was good preparation for my journalism career since I was always being cussed by the foreman. He was a retired 20-year Army drill sergeant who was always snarling, always smoking, and always coughing. The foreman never explained how to do a task since he preferred vehemently cussing you afterwards for doing it wrong. “What-da-hell’s-wrong-with-you-Red?” quickly became his standard refrain.
No one who worked in that orchard was ever voted “Most Likely to Succeed.” But one co-worker provided me with a lifetime of philosophical inspiration, more or less. Albert, a lean 35-year-old who always greased his black hair straight back, had survived plenty of whiskey-induced crashes on life’s roller coaster.
Back in those days, young folks were browbeaten to think positively about institutions that domineered their lives (such as military conscription). Albert was a novelty in my experience: a good-natured person who perpetually scoffed. Albert’s reaction to almost everything in life consisted of two phrases: “That really burns my ass!” or “No Shit!”
After I turned 16, I worked one summer with the Virginia Highway Department. As a flag man, I held up traffic while highway employees idled away the hours. On hot days in the back part of the county, drivers sometimes tossed me a cold beer as they passed by. Nowadays, such acts of mercy might spark an indictment. The best part of the job was wielding a chainsaw—another experience that came in handy for my future career.
I did “roadkill ride-alongs” with Bud, an amiable, jelly-bellied truck driver who was always chewing the cheapest, nastiest ceegar ever made—Swisher Sweets. The cigars I smoked cost a nickel more than Bud’s, but I tried not to put on airs around him.
We were supposed to dig a hole to bury any dead animal along the road. This could take half an hour or longer. Bud’s approach was more efficient. We would get our shovels firmly under the animal—wait until no cars were passing by—and then heave the carcass into the bushes. It was important not to let the job crowd the time available for smoking.
I was assigned to a crew that might have been the biggest slackers south of the Potomac and east of the Alleghenies. Working slowly to slipshod standards was their code of honor. Anyone who worked harder was viewed as a nuisance, if not a menace.
The most important thing I learned from that crew was how not to shovel. Any Yuk-a-Puk can grunt and heave material from Spot A to Spot B. It takes practice and savvy to turn a mule-like activity into an art.
To not shovel right, the shovel handle should rest above the belt buckle while one leans slightly forward. It’s important not to have both hands in your pockets while leaning, since that could prevent onlookers from recognizing “Work-in-Progress.” The key is to appear to be studiously calculating where your next burst of effort will provide maximum returns for the task.
One of this crew’s tasks that summer was to build a new road. The assistant crew foreman was indignant: “Why does the state government have us do this? Private businesses could build the road much more efficiently, and cheaper, too.” I was puzzled by his comment, but by the end of the summer I heartily agreed. The Highway Department could not competently organize anything more complex than painting stripes in the middle of a road. Even the placement of highway direction signs was routinely botched.
While I easily acclimated to government work lethargy, I was pure hustle on Friday nights unloading trucks full of boxes of old books at a local bindery. That gig paid a flat rate, in cash, that usually worked out to double or triple the Highway Department wage.
The goal with the Highway Department was to conserve energy, while the goal at the book bindery was to conserve time—to finish as quickly as possible and move on to weekend mischief. With government work, time routinely acquired a negative value—something to be killed.
The key thing kids must learn from their first jobs is to produce enough value that someone will voluntarily pay them a wage. I worked plenty of jobs in my teen years – baling hay, cutting lawns, and hustling on construction sites. I knew I’d need to pay my own way in life and those jobs got me in the habit of saving early and often.
But according to today’s conventional wisdom, teenagers should not be put at risk in any situation where they might harm themselves. The enemies of teenage employment rarely admit how the government’s “fixes” routinely do more harm than good. My experience with the highway department helped me quickly recognize the perils of government employment and training programs.
Those programs have been spectacularly failing for more than half a century. In 1969, the General Accounting Office (GAO) condemned federal summer jobs programs because youth “regressed in their conception of what should reasonably be required in return for wages paid.”
In 1979, GAO reported that the vast majority of urban teens in the program “were exposed to a worksite where good work habits were not learned or reinforced, or realistic ideas on expectations in the real world of work were not fostered.” In 1980, Vice President Mondale’s Task Force on Youth Unemployment reported, “Private employment experience is deemed far more attractive to prospective employers than public work” because of the bad habits and attitudes spurred by government programs.
“Make work” and “fake work” are a grave disservice to young people. But the same problems permeated programs in the Obama era. In Boston, federally-subsidized summer job workers donned puppets to greet visitors to an aquarium. In Laurel, Maryland, “Mayor’s Summer Jobs” participants put in time serving as a “building escort.” In Washington, D.C., kids were paid to diddle with “schoolyard butterfly habitats” and littered the streets with leaflets about the Green Summer Job Corps. In Florida, subsidized summer job participants “practiced firm handshakes to ensure that employers quickly understand their serious intent to work,” the Orlando Sentinel reported. And folks wonder why so many young people cannot comprehend the meaning of “work.”
Cosseting kids has been a jobs program for social workers but a disaster for the supposed beneficiaries. Teen labor force participation (for ages 16 to 19) declined from 58 percent in 1979 to 42 percent in 2004 and roughly 35 percent in 2018. It’s not like, instead of finding a job, kids stay home and read Shakespeare, master Algebra, or learn to code.
As teens became less engaged in society via work, mental health problems became far more prevalent. The Centers for Disease Control and Prevention found that in “the 10 years leading up to the pandemic, feelings of persistent sadness and hopelessness—as well as suicidal thoughts and behaviors—increased by about 40 percent among young people.”
The troubled teen years are producing dark harvests on campus. Between 2008 and 2019, the number of undergraduate students diagnosed with anxiety increased by 134 percent, 106 percent for depression, 57 percent for bipolar disorder, 72 percent for ADHD, 67 percent for schizophrenia, and 100 percent for anorexia, according to the National College Health Assessment.
Those rates are much worse post-pandemic. As psychiatrist Thomas Szasz observed, “The greatest analgesic, soporific, stimulant, tranquilizer, narcotic, and to some extent even antibiotic – in short, the closest thing to a genuine panacea – known to medical science is work.”
Those who fret about the dangers that teens face on the job need to recognize the “opportunity cost” of young adults perpetuating their childhood and their dependence. Sure, there are perils in the workplace. But as Thoreau wisely observed, “A man sits as many risks as he runs.”
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